Keeping your supply chain optimized means keeping a close eye on your costs, including any “extra” fees that can creep onto your ocean freight invoice.
With consumer spending down, inventory at high levels, and warehouse space at a premium, some businesses have found themselves confronted with per diem charges. Rather than accepting them as par for the course, it’s possible to reduce these “extra” charges—or eliminate them completely.
We’ll show you exactly what these per diem charges are, and we’ll give you some strategies for avoiding them. We’ll also walk you through several other ocean freight charges—detention and demurrage—so you can take control of your invoices and protect your margins.
First, let’s talk about why these per diem charges have cropped up for suppliers, wholesalers, retailers, or any business with a significant amount of inventory.
Consumer Demand Is Down, Warehouse Demand Is Up
According to current projections, consumer spending in the U.S. peaked in March 2021. By February 2023, nearly two years later, spending on goods was down 5.4% overall, according to the Financial Times. This downward trend held even through the traditional U.S. holiday season. Deloitte reported that consumer spending on durable goods fell 1.6% in December 2022, marking the second straight month of decline.
As a result of this decrease in spending, some businesses have been left with high levels of inventory and, in some cases, very little room. Warehouse capacity is low in the U.S., and that’s predicted to continue. Rising interest rates and supply chain challenges continue to impact the construction industry, which has started fewer new industrial projects.
When faced with this scenario, some importers feel they have no choice but to keep the shipping containers they’re receiving. While that might seem like a valid instant storage solution, it’s one that also comes with fees. Let’s dive into those next.
“Extra” Ocean Freight Fees:
Detention, Demurrage & Per Diem
For the last few years, ocean freight shipping has seen its share of challenges. Rate volatility aside, any “extra” fees you might incur will only eat into your margins—or force price increases on increasingly reluctant consumers. If you can avoid these costs from the start, you’ll find yourself in a much stronger position. Let’s take a look at several common ocean freight fees—and how to avoid them.
Finally, the Federal Maritime Commission (FMC) has gotten involved in the issue of demurrage and detention, with the intention of adding more clarity to demurrage and detention billing practices. The proposed rule currently under consideration would require greater transparency, timeliness around charges, and a time period to dispute those charges. Stay tuned to see how the rule progresses.
Now that you’ve got an understanding of the fees involved, let’s take a look at how you can reduce them—or avoid them altogether.
Logistics Solutions to Avoid Per Diem Fees
Before you decide that a per diem fee is just the cost of doing business in today’s environment, we’ve got a few alternatives for you to consider:
Reducing Your Costs and Creating New Efficiencies
Between the rise in U.S. storage rates (10.6% year-over-year) and the impact of the current tariffs on China, many importers find themselves faced with two possibilities: dealing with smaller margins or charging higher prices. However, by understanding the full range of storage options—as well as the logistics strategies that might save you money in these areas—you’re better positioned to control your costs from the start.
Looking for some help streamlining your logistics and combating higher costs? Our experts specialize in uncovering new supply chain efficiencies to reduce logistics expenses. Reach out for a complimentary consultation, and we’ll take a holistic look at your supply chain—together.
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